MX market under pressure but still hope

Source: China Chemical Industry News July 25, 2019

In the second half of this year, the global mixed xylene (MX) market is facing the threat of declining downstream paraxylene (PX) prices and profit margins, but there are also some growth factors. For example, the successive production of new PX units in Asia is supporting local MX prices, and the closure of the Philadelphia Energy Solutions refinery in the northeastern United States is stimulating the demand for MX in the gasoline blending market in the US and Europe.

Asian PX devices are put into production one after another

Newly built PX devices in China are being put into production one after another, causing oversupply in the Asian PX market. However, the commissioning of these new installations also brings hope for increased demand for upstream MX. One of the key new installations is Sinopec Hainan Refining and Chemical Company's No. 2 PX unit, which is expected to be commissioned in September. The S&P Global Platts Energy Information report said that after the plant was put into production, Sinopec is expected to import about 20,000 tons of heterogeneous MX each month.

According to data from Platts Energy Information, so far this year, AsiaMX prices rose against the trend, from US$620/ton (FOB, South Korea) on January 2 to US$720/ton (FOB, South Korea) on July 16. Over the same period, Asian PX prices fell by US$69.50 to US$858.83/ton (CFR, China). The price difference between PX and MX hit a high of US$466.67 per ton on March 12, but it narrowed to US$138.83/ton on July 16.

As the profit margin of production decreases,The operating rate of the PX device may be reduced, which will have a slight negative impact on MX. A Northeast Asia PX manufacturer stated: \"The new PX unit will consume more MX, but the existing PX unit may reduce the operating rate. The new PX unit put into production and the existing PX unit operating rate will reduce MX in the second half of the year Achieve a balance between supply and demand.\" For example, South Korea's S-Oil is expected to significantly reduce MX sales in August.

A Northeast Asian traderThe outlook for the MX market is optimistic, and the price difference between MX and naphtha will be close to US$200/ton for a period of time. From January to mid-July this year, the average price difference between MX and naphtha was about US$160 per ton.

US market is under pressure

DownstreamThe dual impact of the downturn in the PX market and the decline in export demand, US MX prices are expected to continue to face pressure in the second half of the year. Platts data shows that in early July, the blended value of the US MX was as high as 273.37 cents/gallon. This trend will continue into July and gradually weaken in August.

The reason is that in the second quarter of this year, the United StatesPX spot prices began to fall and continued to remain low in the second half of the year. According to data from Platts Energy Information, the difference between the MX and PX spot market in the US spot market turned negative at the end of June, and fell to a negative US$51/ton. Calculated based on the average spot MX price in June, the price difference between MX and PX was barely positive, hovering below $20 per ton in early July. At such a spread level, the PX device is unprofitable, inhibiting the market's demand for MX.

Market participants stated thatThe decline in MX demand was partly offset by the limited production of toluene conversion units, because the profitability of toluene disproportionation hovered in the negative range for most of the first half of this year. As the demand for toluene in the gasoline industry declines and prices fall, the profitability of toluene disproportionation may increase in the second half of this year. However, this will still depend on stronger benzene and MX prices.

DownstreamSeasonal demand in the PET market is another factor affecting MX prices. Normally, PET demand in the United States is stronger in the summer months, and sources said that PET demand may decline at the end of the third quarter and the fourth quarter. This will have a negative impact on the upstream PX market, which in turn will affect the MX market.

Sources said that looking to the future, the United StatesMX prices are expected to face pressure, but there may still be some increases. The driving force for the rise came from the closure of the refinery of the Philadelphia Energy Solutions in the northeastern United States and the imminent implementation of IMO 2020.

Europe benefits from gasoline blending market

So far this year, European chemical demand has been sluggish,The price difference between PX and MX once fell into the negative region, which is still not optimistic for manufacturers. As a result, spot market activity has been relatively sluggish, which also limits producers' production.

EuropeThe MX market seeks hope through the gasoline blending market. This prevents the MX premium to PX from falling to historical lows. Although the premium of MX to PX has dropped significantly since the end of 2018, the strong momentum of the gasoline market and the high value of MX blending maintain the demand for MX in the gasoline blending market. The driving force behind the demand for MX in the gasoline blending market will be European gasoline exports to the United States.

After the Philadelphia Energy Solutions refinery fire, the US demand for European gasoline is expected to increase. As the US plans to permanently close this damaged335,000 barrels per day of refinery, which may reduce the daily production of gasoline in the US market by 154,000 barrels. As the US bans the use of high-octane MTBE blended gasoline, the European gasoline blending market is expected to continue to support MX demand.